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* Dollar gains as Obama claims decisive victory
* Dlr index gains after steep falls Tues; yen rises
* ECB, BoE seen cutting interest rates 50 bp or more Thurs
* EZ Oct services PMI slumps; Dovish ECB Stark comments
(Adds quotes, updates prices, previous TOKYO)
By Jessica Mortimer
LONDON, Nov 5 (Reuters) - The dollar rose against a basket of currencies on Wednesday, rebounding from a big fall in the previous session, as Democrat Barack Obama sealed victory in the U.S. presidential election.
Following the decisive vote results, investors turned their attention to the global recession, which kept risk aversion high and pushed stock prices lower. That helped the low-yielding yen while higher-yielding currencies such as the pound struggled.
Both the Bank of England and the European Central Bank are expected to deliver big interest rate cuts on Thursday as they seek to dampen economic slowdowns in the UK and the euro zone. Analysts said the prospect of lower rates was pushing the euro and sterling down on Wednesday.
After falling more than 2 percent on a trade-weighted basis on Tuesday, dollar buying kicked in shortly after media projected that Obama had captured the White House.
"The dollar is working to recover some of yesterday's losses and the Presidential election result has certainly added it's own support," head of sales trading at CMC Markets Gary Thomson said, adding that a quick result was boosting the U.S. currency.
At 1003 GMT, the dollar was up 0.8 percent on a trade-weighted basis at 85.266, while the euro fell more than 1 percent against the dollar to $1.2840.
Market participants said that a 2.4 percent slide in European shares was also helping the dollar to gain as investors remained cool on risk.
The yen gained meanwhile, with the dollar down over 1 percent at 98.45 yen and the euro falling more than 2 percent to 126.40 yen.
ECB, BOE TO CUT RATES
Both the European Central Bank and the Bank of England are seen cutting borrowing costs by 50 basis points or more on Thursday, reducing the return on assets held in euros and pounds.
"The ECB is expected to cut interest rates by at least 50 basis points and this is why we are seeing the euro pulling back," BNP Paribas senior currency strategist Ian Stannard said.
Dovish comments on Wednesday from ECB executive board member Juergen Stark -- seen as one of the arch hawks among euro zone policymakers -- and more weak euro zone data helped cement rate cut expectations.
Stark told the Financial Times Deutschland that weak euro zone growth and oil price fluctuations could push inflation briefly into negative territory.
Euro zone retail sales fell 1.6 percent year-on-year, data showed while the Markit purchasing managers' index for the region's service sector was revised down to 45.8 in October, the lowest in the series' 10-year history. A reading below 50 marks contraction in the sector.
Meanwhile, the dire state of the UK economy and fears about its reliance on the crisis-hit financial services sector prompted talk of the possibility of a rate cut of as much as 100 basis points by the Bank of England on Thursday.
The decision on Wednesday by Abbey, the mortgage bank owned by Spain's Banco Santander to raise repayment rates on its tracker loans highlighted the urgent need for official borrowing costs to fall sharply.
"Expectations for a 100 basis point cut by the Bank of England are starting to build. The Abbey move is very significant and highlights that the BoE needs to do a lot more in terms of cutting rates," BNP Paribas' Stannard said.
The pound fell roughly 1 percent against the dollar to $1.5800.
Talk of a significant fall in UK interest rates gathered pace after the Reserve Bank of Australia cut interest rates by a bigger-than-expected 75 basis points on Tuesday.
Along with other central banks around the globe, the ECB and the BoE slashed interest rates by 50 basis points on October 8 to 3.75 percent and 4.5 percent respectively in a coordinated move.
(Reporting by Jessica Mortimer; editing by Patrick Graham)